MAGGIE PAGANO: Politicians should fight for our family firms that bring in a fifth of all Government tax revenues

Here’s a puzzle to chew on over the New Year. If there is such a distaste for capitalism, why are so many families putting themselves on the line and founding their own firms?

Since 2010, one million family businesses have been started in the UK.

Two-thirds of British firms are family owned. They are big employers, providing work for 12.2million people – more than a third of the 32.48million working population.

Perhaps some of us have had enough of our relatives after the enforced togetherness over Christmas.

Big employers: Two thirds of British firms are family owned & provide work for 12.2m people

But there is no denying that the family can be a highly efficient wealth-generating machine.

If there is one New Year resolution politicians could usefully make, it would be to pay more attention to family firms, which are an under-appreciated engine of growth.

A report by the Institute for Family Business showed that the gross value-added contribution to national income by family firms has increased by £100billion since 2010 to £519billion – a quarter of the total.

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Unlike some gigantic US corporations making huge sales here, they are major contributors to the Exchequer.

In 2017 they paid a combined £149billion in tax, a fifth of all Government tax revenues – about the same as the annual NHS budget.

Many are one-man or one-woman bands, but there are also many significant employers, particularly in the construction and retail industries.

In the crucial high-value-added manufacturing sector, a quarter of a million family firms employ more than a million people.

Paying their dues: In 2017 family businesses paid a combined £149billion in tax

Even more interesting is that many start-ups and family firms do not depend on the City for their growth capital – most investment still comes from ‘the three Fs’ – friends, families and, as they say, fools.

These numbers speak for themselves. What is shocking is that this is so little known, and that there are few politicians in Westminster, or policymakers in Whitehall, who seem to care about such entrepreneurs.

They’re the backbone of local communities and the economy, but you’d never know it.

By contrast, the 2,000 or so publicly-listed companies that employ only 8 per cent of the British workforce get a disproportionate amount of airplay and headlines.

This is scandalous, but also short-sighted. Whatever the outcome of Brexit, the country’s health depends on small companies for our future growth.

Although the number of family-owned businesses is growing fast, they need nurturing if they are to be sustained.

More than a third of the medium-sized firms are in their second family generation, but the IFB’s report also showed that most wither away by the fourth generation.

They die out because the tax system is ridiculously complicated when it comes to inheritance and succession issues, forcing many family owners to go to outside investors, leading to dilution or sale.

It’s estimated that fewer than 20 per cent expect to keep their firm going. Lord Bamford, chairman of JCB, one of the UK’s biggest privately-owned firms, puts it perfectly.

In an article about how governments overlook family businesses, he said: ‘Over the decades, they have disappeared – because of tax regimes that made it impossible to pass firms on, or takeovers that stripped away what was special about the company, or government mandarins who thought they knew better what industry needed.’

He was also right when he said we should look to Germany, where governments of all political persuasions give tax breaks to family-owned businesses, making it easier to transfer them across generations.

If politicians gave a hoot about what is happening on the ground, rather than across the Channel, they would put the needs of family firms and small businesses at the top of their agenda.